Making it hard to stay insured

HEALTH insurance customers are facing tough times as we approach the peak renewal period in January.

The minister for health has confirmed that the risk equalisation stamp duty will be increasing from Mar 1 by approximately 14%. This levy is payable by all health insurance members and is used to compensate any insurer(s) who is deemed to be carrying a disproportionate level of risk versus the market average.

Due to subsequent increases since its introduction in 2009, in many cases this levy now accounts for approximately one third of your typical premium depending on the plan held. We estimate this measure alone could lead to an increase in health insurance costs of up to 5%.

However, this needs to be considered in light of the tax relief changes introduced in the budget. The Government decided to reduce the level of tax relief on all health insurance premiums which we estimate will affect 90% of all adult policyholders.

Previously, the full premium was tax deductible at the standard rate and the relief itself was provided at source, and consumers only paid the net cost to the health insurer. With effect from Oct 15, tax relief will only be available on the first €1,000 gross per adult and €500 gross per child. Whilst the child allowance is adequate, the adult allowance is pitched at a level that will catch most members.

The increases will affect all renewals and new business written from October onwards and the amounts in question range from approximately €35 per adult to €785 per adult depending on the plan held. For those members insured on the likes of VHI’s Health Plus Access (Plan B) or Health Plus Options (Plan B Options) or equivalent plans from other insurers, they are facing pricing increases of €135 to €259 per adult.

Combined with an expected price hike of 10-15% over the coming months to cover medical inflation, higher stamp duty and re-designation of public hospital beds, consumers will be faced with difficult choices if they want to retain their current health insurance benefits.

These cost pressures couldn’t come at a worse time. Approximately 45% of the population is due to renew its cover in the first three months of 2014, with almost 25% of members renewing in January alone.

Many will not be able to absorb these increases and will be forced to downgrade their cover to include private hospital excesses and shortfalls for key procedures such as hip or knee replacements. Others will be forced to drop adult or even child dependents and leave those with existing medical conditions on their plan.

Unfortunately, there are many consumers who’ve already cut their cover to the bone and have no further capacity to reduce costs and they will be forced to cancel their health insurance altogether and rely on the public system. Nearly 250,000 consumers have had to cancel their cover in the past four-and-a-half years and we expect close to 70,000 to cancel this year alone. As we see no end to the cycle of price hikes in the short term, we expect this trend of cancellations particularly amongst younger, healthier adults to continue.

If there is a positive to all this, it is that there are numerous lower cost options across all four health insurers. For those members who are on the same plan for three years or more; or who have all the family on the same level of cover; or those who have opted for higher cover for private room accommodation in private hospitals; the likelihood is that they are insured on older legacy plans and are missing out on potential cost savings.

If ever there was a wake-up call to review your cover prior to your next renewal, this is it. In many cases, you don’t even need to change insurer to avail of these savings.

The best advice is to think of your health insurance like car or home insurance — shop around for the best deal; check what the differentials are, especially if you are dropping cover; and if you’re happy with what you find, take the deal and change.

* Dermot Goode is general manager of Cornmarket Healthcare Division and www.healthinsurancesavings.ie

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